Interactive Investor

ii view: Just Eat back in profit but cautious

1st March 2023 11:50

by Keith Bowman from interactive investor

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This international food delivery giant more than halved in value last year. We assess prospects. 

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Full-year results to 31 December

  • Revenue up 4% to €5.6 billion
  • Adjusted profit (EBITDA) of €19 million, up from a prior year loss of €350 million
  • Cash and cash equivalents of €2 billion

Guidance:

  • Expects full-year 2023 adjusted profit of around €225 million

Chief executive Jitse Groen said:

“In 2022, our priority was to enhance profitability and strengthen our business. As a result, we materially improved our financial performance and generated Adjusted EBITDA of €19 million in 2022 compared with minus €350 million in 2021. We expect a further improvement to Adjusted EBITDA in 2023 and our ambition to create a highly profitable food delivery business is firmly on track."

ii round-up:

Online food ordering company Just Eat Takeaway.com NV (LSE:JET) today reported a return to adjusted profitability but offered a cautious near-term outlook.  

Adjusted profit (EBITDA) of €19 million (£16.9 million) in 2022 improved from a loss of €350 million the year before, helped by a 4% increase in revenue to €5.6 billion and bearing down on operational costs. Management repeated its target for an increase in adjusted profit to about €225 million in 2023, although tough comparisons are expected to skew growth to the second half. 

Just Eat shares fell by more than 4% in UK trading before recovering by midday. They had come into this latest announcement having fallen by more than half in 2022. That’s similar to rival Deliveroo (LSE:ROO) and compares to a 19% fall for the FTSE All-World index. 

Total Just Eat order numbers fell 9% last year to 984 million as consumers returned to eating out following pandemic restrictions in 2021, although inflation helped push the average transaction value up 2.7% to €28.66. 

The Amsterdam headquartered company’s focus on costs helped drive order fulfilment costs as a percentage of revenues down to 57% from 65% in 2021.

It made no further update on its potential sale of US business Grubhub which it bought in June 2020 for $7.3 billion. 

Hit by write-downs in the value of both Grubhub and its stake in Brazil's iFood, headline annual losses swelled to €5.67 billion from a €1.04 billion deficit in 2021. 

Broker UBS reiterated its ‘buy’ stance on the shares post the results, flagging operational improvements. 

A first-quarter trading update is scheduled for 19 April.  

ii view:

Started in the year 2000, Just Eat today connects consumers with more than 690,000 food partners or restaurants via its online platforms. Its wide geographical areas of operation include the US, the UK, Germany, the Netherlands and Australia. Its current ambitions include adding more than €30 billion of Gross Transaction Value, or GTV over the next five years, up from a current €28.2 billion. 

For investors, a highly uncertain economic outlook including further possible interest rate rises and a cost-of-living crisis for consumers may potentially crimp future customer spending. Costs for businesses generally remain elevated, its previous takeover of Grubhub now looks ill judged, while there's little hope of a dividend in the foreseeable future. 

More favourably, management is working on improving operational efficiency including previously exiting areas of the business which have struggled to make money like Norway and Portugal. Its brand is strong, geographical diversity remains wide, while a previously agreed partnership with Amazon (NASDAQ:AMZN) offers promise. 

For now, and while its efficiency drive continues, investors may demand further evidence of profit recovery. 

Positives: 

  • Diverse geographical markets
  • Investing for growth

Negatives:

  • Uncertain economic outlook
  • Intense competition

The average rating of stock market analysts:

Strong hold

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